Crony capitalism is alive and well. Big business and big government go hand in hand.
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Samizdata quote of the dayMay 6th, 2015 |
 24 comments to Samizdata quote of the day |
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Don’t call it crony capitalism – call it cronyism or graft but do not associate capitalism with corruption.
As for big business and big government – big businesses are essential to a modern economy.
It’s big government that’s the problem.
And she should know!
I heard her at length of NPR this morning. Despite her lack-lustre performance during her time at EDS, I’m actually starting to think quite well of her as compared to all other potential Republican candidates.
The frightening thing is just how little that says for the Republican field so far – that a relative unknown with no executive or legislative experience and a rather ho-hum business record can look better than most of the others.
She should hammer this point home specific to Obamacare, and produce the numbers showing that this was a vast regulatory capture and massive dollar windfall for the insurance industry. Punch back, twice as hard.
llater,
llamas
@JohnW
> Don’t call it crony capitalism – call it cronyism or graft but do not associate capitalism with corruption.
I am not a fan of the name capitalism, I think it is both misleading and also has a lot of unpleasant baggage. The thing that matters is not the accumulation of capital to create and run enterprises, what matters is freedom, the freedom to use one’s capital, energies, ideas and passion in whatever way we see fit. It is why I much prefer the term “free market”. It isn’t about capitalist fat cats, that is what the lefties want to pin on us, it is about freedom to do as we wish, insofar as it doesn’t directly injure the reasonable rights of others. The freedom to succeed of fall on our face. That is what makes all of us rich.
> As for big business and big government – big businesses are essential to a modern economy.
There are some businesses that need to be big, but many businesses are big because they need to be big to defend themselves against big government, or to take advantage of the barriers and rent seeking big government offers them.
The most obvious example of this right now is in the American medical industry. It used to be that that medical industry in the US was this wonderful mesh of small independent practices, and independent hospitals and so forth that all worked together with that glorious invisible hand. Doctors got out of school and formed a practice with their friends, hospitals were small and independent and worked in a network of cooperative relationships with competition for business.
Now, the massive burdens of regulation cause this massive sucking sound as all those glorious small businesses fold under the pressures of big government and consolidate together into mega groups with doctors as employees, and hospitals lost in big conglomerations. Talk to almost any doctor in the USA and you will hear the same story: reduced from a high flying entrepreneur to a assembly line wage slave.
This same thing applies in many, dare I say most, large firms. At the bottom line companies get big to reduce transaction costs through economies of scale and vertical and horizontal integration, and for capital formation for extremely large indivisible projects. However, the bigger they get the complexity also increases those costs until they are the dominant costs; the rarely discussed diseconomies of scale. However by that point they have enough money to buy enough government to layer transaction costs on their up and coming competitors so that the small business is overwhelmed by government instituted transaction costs to compensate for the intrinsic internal explosion of meetings and bullshit that every large company has.
Some projects need to be big. It is hard to drill for oil or build fighter aircraft in a mesh network. But most companies don’t need to be like that at all.
It really is a rather horrific thing that makes us all much poorer than we could be.
> It’s big government that’s the problem.
Well yeah, for sure.
Very well put, Fraser – thanks for that.
My preferred term is “aristo-communism.” It’s wannabe-aristocrat big government and big business types working together to smother free-market capitalism and bourgeois private-property rights, and to usher in a modern version of medieval serfdom. Or of the antebellum southern slave plantation, which was perhaps the closest equivalent to medieval serfdom existing post-industrial-revolution, and which was called – by its admirers – the “beau ideal of socialism.”
Given Digital Equipment Corp, Compaq and the HPs relationship with the USG, well, she ought to know.
Some projects need to be big. It is hard to drill for oil or build fighter aircraft in a mesh network.
Weeeeell. These days, it is the smaller, lighter, and more flexible oil companies that have the exploration success, mainly because the supermajors and national oil companies 1) won’t take a risk and 2) operate a culture where only good news is tolerated, leading to massaged data. Their business model is usually to start a company, make a find, and then flog the field to a bigger company to actually develop it, making millions for the handful of owners.
The problem comes when you come to develop the field. Tullow Oil – which is in serious financial strife right now – was an astonishingly successful explorer but then decided it wanted to be a mid-sized operator and develop the fields to produce oil. It has been an utter clusterf*ck, mainly because they employed the completely wrong type of people to carry out this sort of work. Not that they did anything different from every other oil company, but the majors have very deep pockets from which they can throw billions at projects that are going wrong: Tullow didn’t. But to actually develop an oilfield, it was traditionally believed you needed to be a giant company with lots of expertise, but in actual fact the main advantage these companies brought to a development was their unrivalled access to capital. The majors could fund the projects – either directly or via loans at preferential rates – but otherwise it was mainly contractors who did the clever stuff. The industry is slowly working this out, because the majors are finding themselves shut out of more and more developments as smaller companies and nationalised oil companies go it alone.
On top of this, you have the fact – barely recognised in the industry even today – that the days of giant projects being carried out by major oil companies are waning. Future giant projects will be carried out mainly by national oil companies (with majors in as partners), and they will be fewer and fewer. And at the same time, more and more smaller fields will be developed by small, lean, flexible companies who can make decisions faster than the majors and whose costs are orders or magnitudes lower (I wrote about this here). Whereas once the supermajors ruled the oil industry, and will continue to do so for some time, there will be less room for all of them. I wrote here that there is probably one or two too many, and Total is looking the most vulnerable: not in terms of takeover (the French government would never allow it) but in terms of general decline along the path of General Motors, where the order books dry up as union demands increase and politics takes over.
True some “Corporate Welfare” does exist – for example the Export-Import government “bank” that so many “Progressives” support (including the junior Senator from Mass).
However, the vast majority of government spending is NOT on Corporate Welfare.
In fact American “big business” faces some of the highest taxes and some of the most extreme regulations in the Western World – especially in California (where this lady was based).
If even the Republican party is scared of defending “the rich” and “big business” – then it is time to get out of politics. As the state of public opinion is clearly hopeless – if even Republican business people will not defend “capitalists”, and just do the “Mon and Pop stores” tap dance, avoiding the real issue.
The real point at issue being – is large scale production (“big business”) a good thing or not?
It is a good thing – and it must be clearly stated that it is a good thing.
Paul, you have entirely too narrow a definition of “corporate welfare”. Most of it isn’t in the form of direct cash grants (although there is certainly some of that: you already pointed out the Ex-Im Bank, which is primarily a huge subsidy to Lockheed Martin). Most of it takes the form of sweetheart deals (goods and services) and, notably, regulatory impediments to competition. If you can get the government to stifle potential competitors you don’t need to improve your product or minimize your prices.
Exactly correct and from Carly Florina’s past utterances, that would seem to be what she is indeed talking about.
@Paul Marks
> However, the vast majority of government spending is NOT on Corporate Welfare.
It depends on what you mean by corporate welfare. For example right now the US Government is funding the development of the F35 fighter jet. In one sense this is the government buying something, and surely military purchases are viable functions of even a Minarchy. However, it is also a huge boondoggle. Massively overpriced with much of the overprice being due to political purchases. I don’t remember the exact number but something in the order of 90% of all congressional districts have some piece of the 400 billion dollar pie. Is that a coincidence? I don’t think so. So if this plane could be produced for 10% of that 400 billion dollars then 90% of that money is corporate welfare.
Another source of corporate welfare is where the government provides price support to companies via various regulatory mechanisms that make competitive pressures very difficult. This allows these large companies to engage in monopoly pricing, a quid pro quo for the big business big government link.
I know it is controversial, but in my opinion one of the biggest examples of this is the patent system. This is a system that explicitly gives monopoly power to certain companies who have enough money to buy the expensive legal machines necessary to churn out pages of patents. The idea that patents protect uncle Joe who invented the fancy new widget in his garage from the big mean corporation is entirely at odds with the the reality of the patent system. In fact often the exact opposite is true. Your Android phone costs $15 extra, a nice little transfer payment to Microsoft that is bare naked robbery in my opinion.
The most obvious place where this exists (though it is everywhere) is in the medical industry. I am confident that most medical devices and services cost between five and fifty times more than they would in a fully competitive environment. This is due both to patents, licensing laws, mountains of regulation and to the cozy relationship between big pharma and the FDA (and similar in other countries.) I wrote some software for a non life critical medical device. Were I to describe the amount of utterly useless, bullshit paperwork and meetings involved in doing so you would consider it comical hyperbole. AT least 90% of the time on that project was related to “fill in this pointless form” compliance rather than generating useful artifacts.
> In fact American “big business” faces some of the highest taxes and some of the most extreme regulations in the Western World
Sure, and both are at their root corporate welfare. Taxes are high so that there is money to redistribute, regulations are strong for the reasons stated above.
> If even the Republican party is scared of defending “the rich” and “big business” – then it is time to get out of politics.
I’d defend neither. There are plenty of rich people who got rich in bad ways, and plenty of businesses that go big in bad ways. I think a good politician defends the rights of people to do whatever the hell they want, not some special vested interest like the rich or the big business. If a rich person, like Steve Jobs, is rich because they created useful things and provided stuff people wanted to buy, then awesome. If a rich person got rich by exploiting the government mess, like George Soros, they you won’t here me defend him. Jobs made everyone’s lives better, Soros made Britons’ lives miserable (though the politicians were the proximate cause for sure.)
> The real point at issue being – is large scale production (“big business”) a good thing or not?
Large scale production is a good thing when free market forces measure it as the optimal route (which it is sometimes.) Large scale production is not a good thing when government manipulation forces it into existence or defends its existence beyond a time when it is the optimal choice.
The world’s largest company Microsoft had virtually no Washington “presence” because Bill Gates resisted the notion that a software company needed to hire a lot of lobbyists and lawyers. He didn’t want anything special from the government, except the freedom to build and sell software.
The problem was the government didn’t share his outlook – they brought an anti-trust suit against Microsoft and threatened to destroy the company – you’d better get it straight that it’s not a bunch of boy scouts we’re up against, to paraphrase Atlas Shrugged.
It would, however, be a huge strategic and tactical error to surrender the word capitalism to our enemies. It is an unknown ideal but it is too crucial, too important for us to abandon.
The average man may not know what capitalism is but our enemies do. If they can steal capitalism from us then they will easily steal “free trade*” and “free markets.”
If we can’t fight our enemies on our own turf and say to them “No, that’s you – not us,” then we are finished.
“It is not laissez-faire that has failed. That would be an ill day for men. What has failed is the courage to see what is true and speak it to the people, to point to the true remedies.” – Auberon Herbert.
*Interestingly the recent free-trade v fair-trade debate, which we lost, incidentally, is not a modern debate. We had exactly the same debate using exactly the same terms in the 19th.c. but we won that argument – “Few countries have ever actually adopted a policy of free trade. The major exception was Great Britain, which, from the 1840s until the 1930s, levied no import duties of any kind.” – Encarta 97
JohnW, indeed “crony capitalism” is like writing “square circles”. Such an animal cannot exist. Capitalism is the free enterprise system, ‘free’ from government intervention and manipulation. The proper terminology is ‘crony fascism’. Indeed, it can be argued that one key distinction between the European fascism in the 1930’s and 40’s and Russian communism was the overt cronyism of these fascist nations.
JohnW wrote
President Obama was on Letterman a few days ago (for a freakin half hour segment). This is HIS version of “free trade” (Starting at 17:35, ending at 20:28)
https://youtube.com/watch?v=GwSIHt1DpY0
(That’s youtube, titled President Barack Obama FULL interview on David Letterman show 5/4/2015, just in case the link doesn’t work properly.)
One is inclined to think this marxist a stupid man, if his “misunderstanding” wasn’t so uniform and purpose directed. I suspect he considers himself a benevolent emperor.
Ah, the old “level-playing-field” switcheroo – as John Rawls might have said: the oldies are the best!
“Crony fascism” is redundant.
It appears that Fiorina’s candidacy is beginning to resonate with some Republicans.
Sorry to disappoint, but it was invented and shoved down our throats by our enemies. Outside the Marxist metacontext, the word is meaningless.
Sorry to disappoint, but it was invented and shoved down our throats by our enemies. Outside the Marxist metacontext, the word is meaningless.
I disagree.
If it was meaningless the Left would hardly spend so much time and effort attacking it!!
It is an unknown ideal but for those who are capable of defending it no other word will suffice.
This is how to defend capitalism.
Fabulous video John!
Meanwhile in Greece, a choice quote from a government contractor.
http://www.bbc.co.uk/news/world-europe-32580919
After the 2008 crash, I recall a client (in the UK) telling me that government contracts were like gold dust and everyone in his sector wanted them, as the government would not go bust…
They are attacking a straw man they themselves created – the oldest trick in the book.
Thanks, but I’m afraid I’ll have to pass.